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Remuneration for members of the Management Board

Principles of remuneration

The Supervisory Board determines the structure and amount of remuneration for members of the Management Board. Aareal Bank AG has entered into fixed-term service contracts with the members of its Management Board.

Against the background of the German Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung – "VorstAG") of 31 July 2009 and the German

Regulation Governing Supervisory Requirements for Remuneration Systems of Financial Institutions (Instituts- Vergütungsverordnung – "InstitutsVergV") of 6 October 2010, the remuneration system for members of the Management Board of Aareal Bank AG was examined, also using the support of external advisors, and adjusted with effect from 1 January 2012, regardless of the existing contract terms.

Besides their fixed annual salary, Management Board members receive a performance-related bonus (variable remuneration) that is determined using an assessment basis extending over several years. The level of this performance-related bonus is determined by reference to the personal performance of each Management Board member which is measured by the degree to which targets set in advance by the Supervisory Board are achieved, based on contractually agreed initial values. The targets which are relevant for performance-related bonuses include annual targets and three-year targets. The weighting of annual targets to three-year targets is fixed for each financial year, with a 60%/40% weighting taken as a guideline.

In terms of substance, annual and three-year targets are derived from the overall strategy and the annual and medium-term planning of Aareal Bank Group, each of which are agreed upon with the Supervisory Board. The targets comprise quantitative components and qualitative components, which are also related to non-financial parameters. In this context, the bank's overall performance, the performance of the relevant section, and the individual performance contributions of the Management Board member concerned are all taken into

consideration.

The amount of the initial value of the performance-related bonus increases - depending on the Management Board member's degree of target achievement - up to a maximum of 200%. If the target achievement exceeds a level of 200%, the initial value of the performance-related bonus will not increase any further (cap). If target achievement is 0%, no performance-related bonus will be awarded for the financial year concerned. The initial value is fixed at 100% for target achievement levels between 90% and 110%.

To ensure that the remuneration system provides long-term incentives, performance-related bonuses are awarded at the end of the financial year, according to the following principles:

20% of the initial value of the performance-related bonus is disbursed as a cash bonus directly after the financial year has concluded. A further 20% of the performance-related bonus is awarded as a share bonus9 in the form of phantom shares directly after the end of the financial year and are the subject of the Share Bonus Plan. 30% of the performance-related bonus is deferred as a cash deferral (Cash Deferral). The remaining 30% of the performance-related bonus is deferred as a share deferral9 and are the subject of the Share Deferral Plan.

With regard to the portion of the performance-related bonus that is deferred initially as a cash deferral or a share deferral, the Supervisory Board makes a decision regarding the granting of one third of the amount as well as the associated interest in the three years following the determination of the performance-related bonus (retention period). If the deferred remuneration components for the Management Board members are actually awarded, the cash deferral is paid out in cash and the share deferral is converted into virtual shares, subject to a two-year holding period.

In making its determination about the amount to be awarded, the Supervisory Board primarily takes into account any negative aspects of the Management Board member's performance, his section as well as any negative overall performance of Aareal Bank AG or the Group as a whole. The final amount may be awarded in full, partially or not at all. If the full amount is not awarded, the remaining sum is forfeited, i.e. it is not carried forward into subsequent years. No bonus may be awarded if BaFin makes an official ruling against the

9

Please refer to the subsection ”Cash-settled share-based payment“ in this Remuneration Report for further explanations related to the structure of the Share Bonus Plan and the Share Deferral Plan.

bank pursuant to section 45b (2) of the German Banking Act (Kreditwesengestz – "KWG") due to shortcomings relating to capital adequacy or liquidity issues. If a case of serious individual misconduct by a member of the Management Board is identified afterwards in the financial year in which the remuneration components were awarded as a cash deferral and a share deferral, the retained remuneration components are cancelled in full. Members of the Management Board may not undertake to limit or hedge the risk orientation of the

performance-related bonus themselves (hedging ban).

Remuneration

Remuneration of the members of the Management Board can be broken down as follows:

Year

Fixed

remuneration Variable remuneration

Other 1) _remunerationTotal

Cash component Share-based component

Cash bonus Cash deferral Share bonus Share deferral

€

Dr Wolf Schumacher 2012 1,100,000.00 330,000.00 495,000.00 330,000.00 495,000.00 26,026.59 2,776,026.59

2011 800,000.00 2,012,500.00 - 562,500.00 - 26,632.46 3,401,632.46

Dirk Große Wördemann2) ₂₀₁₂

650,000.00 158,800.00 238,200.00 158,800.00 238,200.00 31,189.76 1,475,189.76 2011 650,000.00 178,875.00 267,750.00 178,875.00 267,750.00 27,060.92 1,570,310.92 Hermann J. Merkens 2012 700,000.00 195,600.00 293,400.00 195,600.00 293,400.00 53,909.48 1,731,909.48 2011 650,000.00 1,137,500.00 - 562,500.00 - 55,309.91 2,405,309.91 Thomas Ortmanns 2012 700,000.00 195,600.00 293,400.00 195,600.00 293,400.00 26,695.09 1,704,695.09 2011 650,000.00 937,500.00 - 562,500.00 - 38,042.53 2,188,042.53 Total 2012 3,150,000.00 880,000.00 1,320,000.00 880,000.00 1,320,000.00 137,820.92 7,687,820.92 2011 2,750,000.00 4,266,375.00 267,750.00 1,866,375.00 267,750.00 147,045.82 9,565,295.82 1

Other remuneration includes payments (in particular for company cars) in the amount of € 85,521.76 in 2012 (2011: € 78,817.13) as well as benefits related to social security contributions totalling € 45,231.36 for 2012 (2011: € 44,974.08).

2

The cash deferral and share deferral components relate to the financial year reported. Based on a Supervisory Board resolution, Mr Große Wördemann receives a payout in the amount of € 91,766.85 relating to the cash deferral retained in the past financial year as well as a payout amounting to € 91,766.85 which is converted to virtual shares pursuant to the Share Deferral Plan, with the shares being subject to a holding period of two years.

The following initial values for the performance-related bonus at an overall target achievement level of 100% were agreed upon in the service contracts of the Management Board members:

Reference values for variable

remuneration

Reference values for variable

remuneration

2012 2011

€

Dr Wolf Schumacher 1,650,000.00 1,400,000.00

Dirk Große Wördemann 794,000.00 794,000.00

Hermann J. Merkens 978,000.00 800,000.00

Thomas Ortmanns 978,000.00 800,000.00

Total 4,400,000.00 3,794,000.00

No benefits were granted to any member of the Management by third parties with respect to his Management Board activities during the year under review.

The following table shows the portion of the variable component attributable to share-based payment arrangements as well as the corresponding number of virtual shares granted:

Share-based payment

Year Value (€) Quantity (number)1

Dr Wolf Schumacher 2012 825,000.00 52,514.32

2011 562,500.00 40,221.67

Dirk Große Wördemann 2012 397,000.00 25,270.53

2011 446,625.00 31,936.00 Hermann J. Merkens 2012 489,000.00 31,126.67 2011 562,500.00 40,221.67 Thomas Ortmanns 2012 489,000.00 31,126.67 2011 562,500.00 40,221.67 1

The stated number of virtual shares granted for 2012 is a preliminary figure, based on the price of Aareal Bank AG's share on 31 December 2012 (€ 15.71). The final conversion rate may only be determined after publication of the 2012 annual report.

Pensions, retirement benefits and severance pay

The benefit regulations as agreed in the employment contract apply to the members of the Management Board of Aareal Bank AG. Accordingly, they are entitled to receive pension payments after completing their 60th year of age, or earlier in case of a permanent disability of service. For members of the Management Board

appointed on or after 1 November 2010, this rule applies only from the beginning of the second term of office. The following overview shows the pension claims of the members of the Management Board and the changes of the corresponding pension provisions during the period under review:

2012 2011 Pension claims p.a.1) Balance of pension obligations as at 31 Dec 2012 Increase of pension obligations in 2012 Pension claims p.a.1) Balance of pension obligations as at 31 Dec 2011 Increase of pension obligations in 2011 € thousands Dr Wolf Schumacher 364 3,079 675 350 2,404 443

Dirk Große Wördemann2) _{- 351 125 - 226 198}

Hermann J. Merkens 209 1,387 261 200 1,126 129

Thomas Ortmanns 210 1,457 376 200 1,081 210

Total 783 6,274 1,437 750 4,837 980

1

The pension claims were calculated for pension benefits paid after completing the 60th year of age.

2

Mr Große Wördemann currently does not meet the contractually agreed vesting criteria for the pension claims.

The pension claims are adjusted to take account of the development of standard wages within the private banking sector as from the beginning of actual payments of pensions, to the extent that these are based on defined benefit plans. If the payments refer to defined contribution plans, the guaranteed amount is adjusted by 1% p.a. The pension paid to widows amounts to 60% of the pension of the member of the Management Board, while pensions to half-orphans and orphans amount to 10% and not more than 25%, respectively. Service cost incurred in financial year 2012 in connection with the pension claims of members of the Manage- ment Board totalled € 1.4 million (2011: € 0.8 million). The present value of the pension obligations for cur- rent members of the Management Board as well as for former members of the Management Board and their surviving dependants increased by € 7.9 million in the year under review (2011: € 0.3 million). The total present value of the pension obligations amounted to € 26.6 million (2011: € 18.7 million). Of that amount,

€ 18.0 million related to former members of the Management Board and their surviving dependants (2011: € 14.1 million). Payments to former Management Board members of Aareal Bank AG and their surviving dependants totalled € 0.9 million (2011: € 0.6 million).

The agreements concluded with members of the Management Board do not include any obligation to make severance payments in case of an early termination of employment relationships. However, severance payments may be included in individual termination agreements.

In the case of a retirement due to a change of control, the members affected receive, in settlement of their total remuneration, a monthly payment, as agreed in their employment contracts, as well as a contractually agreed fixed one-off payment. Depending on the type of the change of control - termination by the Company or termination by the respective Board member –, the agreed benefits are as follows:

Terminated by the company

Terminated by the Board member € per month of remaining

contract term 1

Dr Wolf Schumacher 141,667.00 70,833.00

Dirk Große Wördemann 120,833.00 54,167.00

Hermann J. Merkens 120,833.00 54,167.00

Thomas Ortmanns 120,833.00 54,167.00

1

Upon request of the Board member, the benefits may be paid in form of a one-off payment. In this case, the amount is discounted using the interest rate of the ECB for one-year deposits of private households in the month of payment.

The claims resulting from the early termination of the Board activities due to a change of control are capped to an equivalent of three years' remuneration.

During the term of a SoFFin stabilisation measure, Management Board members are not entitled to any severance pay in the event of an early termination or a change of control. The fulfilment of a Management Board member's contractual remuneration claims arising from the employment contract are not limited by the framework agreement entered into with SoFFin.

Remuneration of the Supervisory Board

Remuneration for the services of the Supervisory Board members is specified in Article 9 of the Memorandum and Articles of Association of Aareal Bank AG. The Annual General Meeting held on 18 May 2011 resolved to adjust the system for Supervisory Board's remuneration in order to reflect the ongoing discussions related to a remuneration system that is appropriate in view of corporate governance aspects. In doing so, Aareal Bank AG follows the current status of the discussions related to the proper structure for remuneration systems for supervisory boards according to which supervisory board members should receive a fixed remuneration only.

The remuneration system for the Supervisory Board only comprises a fixed remuneration, supplemented by a compensation for attending meetings. In addition, the Supervisory Board members will be reimbursed for their expenses. Where membership in the Supervisory Board falls short of an entire financial year, said remuner- ation shall be paid on a pro rata temporis basis. Any value-added tax invoiced will also be deemed to be a refundable expense.

The fixed remuneration is € 30,000 p.a. for each Supervisory Board member. The Chairman of the Supervisory Board shall receive two and a half times this amount, while the deputy shall receive one and a half times as much as a normal member. The fixed remuneration shall be increased by € 15,000 p.a. for each membership in a committee (with the exception of the Nomination Committee, which is an exclusively advisory committee, and the Committee for Urgent Decisions, which is part of the Risk Committee). The fixed remuneration shall be increased by € 30,000 p.a. for the chairmanship of a committee (with the exception of the Nomination Com- mittee and the Committee for Urgent Decisions).

The meeting attendance compensation amounts to € 1,000.00 for each meeting attended (except for meetings of the Nomination Committee and the Committee for Urgent Decisions).

The remuneration for any financial year shall be due and payable one month after the end of the respective financial year.

The individual amount of the remuneration for the Supervisory Board is shown in the following table. The figures in the table include the reimbursement for VAT (19%).

Year Fixed

remuneration Attendance fees

Total remuneration €

Hans W. Reich, Chairman 2012 178,500.00 26,180.00 204,680.00

2011 151,130.00 14,280.00 165,410.00

Erwin Flieger, Deputy Chairman 2012 89,250.00 19,040.00 108,290.00

2011 77,845.84 10,710.00 88,555.84

York-Detlef Bülow, Deputy Chairman 2012 89,250.00 21,420.00 110,670.00

2011 77,845.84 10,710.00 88,555.84

Christian Graf von Bassewitz 2012 71,400.00 21,420.00 92,820.00

2011 62,276.66 9,520.00 71,796.66 Manfred Behrens 2012 35,700.00 5,950.00 41,650.00 2011 31,138.34 2,380.00 33,518.34 Thomas Hawel 2012 35,700.00 9,520.00 45,220.00 2011 31,138.34 3,570.00 34,708.34 Dieter Kirsch 2012 53,550.00 14,280.00 67,830.00 2011 46,707.50 5,950.00 52,657.50 Marija Korsch 2012 16,759.16 4,760.00 21,519.16 2011 - - - Dr Herbert Lohneiß 2012 53,550.00 13,090.00 66,640.00 2011 46,707.50 7,140.00 53,847.50 Joachim Neupel 2012 89,250.00 21,420.00 110,670.00 2011 77,845.84 10,710.00 88,555.84

Prof Dr Stephan Schüller 2012 71,400.00 19,040.00 90,440.00

2011 62,276.66 9,520.00 71,796.66 Wolf R. Thiel 2012 13,387.50 3,570.00 16,957.50 2011 46,707.50 7,140.00 53,847.50 Helmut Wagner 2012 35,700.00 8,330.00 44,030.00 2011 31,138.34 3,570.00 34,708.34 Total 2012 833,396.66 188,020.00 1,021,416.66 2011 742,758.36 95,200.00 837,958.36

The members of the Supervisory Board did not provide any consulting or agency services, or other personal services in 2012. Therefore, no additional remuneration was paid.

Cash-settled share-based payment

a) Description of cash-settled share-based payment

Within Aareal Bank AG, there are various forms of share-based payment arrangements. Among other things, differences between these plans can be found as regards their term and the vesting conditions as well as regarding the group of beneficiaries.

Management Board Share Bonus Plan

According to the rules for the share bonus plan, a portion of the variable remuneration will be converted into an equivalent number of virtual shares and credited to the beneficiary. The calculation of the number of virtual shares is based on the weighted average price on the basis of five trading days (Xetra) after publication (ad- hoc release) of the annual financial statements adopted by the Supervisory Board (subscription price). The date of publication of the respective financial statements is used as the reference date. Not earlier than three years after the reference date, the beneficiary may exercise the virtual shares granted either in whole or in part within five business days after the publication of the quarterly report (holding period). Any virtual shares not exercised may be exercised either in whole or in part at a later date, in each case within five business days after the publication of a quarterly report. Upon exercise, the relevant proportion of virtual shares is converted at the weighted average price as reported by Bloomberg on the exercise date. If dividends are paid on the Company's shares during the time period between the reference date and the exercise date, a payout is made as a salary component in an amount equivalent to the dividends and the proportion of the virtual shares. Share Deferral Plan

Under the Share Deferral Plan, a portion of the variable remuneration is converted into an equivalent number of virtual shares and credited to the beneficiary. This credit, however, does not convey an entitlement or a claim regarding a later payout or grant of virtual shares. Interest accrues on the amount credited in the form of a share deferral to the beneficiary. The reference rate is the interest rate of the European Central Bank for deposits from private households with a term of up to one year. As above, the credit of interest does not con- vey an entitlement or a claim regarding the interest amount. In the three years following the credit (retention period), the Supervisory Board decides whether each a third of the share deferral, including interest, should be converted. The question, whether a third of the phantom shares is converted and, if yes, in which amount, is based on the following principles:

Negative performance contributions of the beneficiary or of the organisational units for which he is responsible for or a negative overall performance of Aareal Bank Group lead to a reduction of the payout, in some cases even to zero. No bonus may be awarded if BaFin makes an official ruling against the bank pursuant to section 45b (2) of the KWG.

If less than 100% of the third of the share deferral eligible for conversion (including interest) is converted into virtual shares, the amount not converted is forfeited and is not carried forward to future years. The rules for the calculation of the number of virtual, their exercise and the other rights and obligations associated with the granting of virtual shares correspond to those applicable for share bonuses, with the exception that (instead of three-year holding period) a holding period of two years applies.

Phantom Share Plan

The Phantom Share Plan applied to virtual shares granted until (and including) the financial year 2011. According to the rules for the Phantom Share Plan, a portion of the variable remuneration will be converted into an equivalent number of virtual shares. The conversion is based on the weighted average price (XETRA) of Aareal Bank AG's share as notified by Bloomberg, on the five trading days following the publication (ad-hoc release) of the financial statements as approved by the Supervisory Board. The entitlement to the remuner- ation, i.e. the award, arises after the Supervisory Board has used its discretion with regard to the amount of variable remuneration within the applicable range. One fourth of the awarded virtual shares become exer- cisable each year. This also applies for the year in which they are awarded. Virtual shares not exercised in a particular year are accumulated. The phantom shares may be exercised either in whole or in part within five business days after the publication of a quarterly report. The relevant price for exercising these phantom shares is the weighted average price according to Bloomberg on the exercise date.

There are no exercise hurdles in form of a minimum stock price appreciation target or other market or per- formance-related criteria. Virtual shares that have not been exercised carry full dividend rights, i.e. the beneficiaries receive for each virtual share not yet exercised a cash payment equivalent to the amount of the approved dividend. The term of the plan is not limited.

Further share-based payment models

Virtual shares are granted to senior executives and the so-called "risk takers" of Aareal Bank AG, as defined by the German Regulation Governing Supervisory Requirements for Remuneration Systems of Institutions (Instituts-Vergütungsverordnung – "InstitutsVergV"), as well as to managing directors and management board members of Aareal Bank AG's subsidiaries on the basis of the following share-based payment models. Share Bonus Plan

According to the rules for the share bonus plan, a portion of the variable remuneration will be converted into an equivalent number of virtual shares. The conversion is based on the weighted average price (XETRA) of Aareal Bank AG's share according to Bloomberg, on the five trading days following the publication of the annual report for the reference period. The entitlement to the remuneration occurs at the end of the reference period. The share bonus is paid out after a minimum holding period of two years, beginning on the date on